UK music and books retailer HMV Group has rejected an £842 million bid approach from private equity firm Permira
The company also pledged to fight supermarkets and online rivals by cutting prices.
"The board unanimously believes that the revised proposal from Permira continues to undervalue the group," HMV said in a statement today.
"As such, HMV Group will not be entering into discussions with Permira with regard to the revised conditional proposal."
HMV, which runs Waterstone's bookstores alongside its eponymous music shops, said last week that Permira had raised its bid proposal to 210 pence a share from 190p.
HMV has been hit hard by cut-price competition from supermarkets and online retailers, and said today it was fighting back.
"The group has focused on formulating a revised value proposition to enable the company to capitalise on the strengths of the HMV brand, the range authority in store and excellent and knowledgeable staff," it said, adding it had started a trial of the new strategy in five stores last week.
Analysts at Numis Securities were not convinced, however.
"We believe HMV is a structurally challenged business, and we expect its profits to decline in perpetuity as it will continue to lose market share to online retailers, downloading and the supermarkets leading to further erosion of gross margins," they wrote in a research note.
They do not expect Permira to return with a higher bid and have a "reduce" recommendation on HMV shares.